The Dow and S&P 500 rose for a third session Monday in a broad-based rally led by technology shares on the back of rotational buying. Investors are also bracing for a busy week that will feature several Federal Reserve speakers, including the new Fed Chairman Jerome Powell’s appearance in front of Congress.

The day’s gains were broad, with 10 of the 11 primary S&P 500 sectors in solidly higher as the tech and telecommunications sectors posted strong gains. Among the notable gainers were Apple Inc.AAPL, +0.64%
which rose 2%, Intel Corp.INTC, +2.18%
which added 2.9%. Microsoft Corp.MSFT, +1.27%
which was up 1.5%.

On Friday, all three gauges gained more than 1% as each benchmark notched its second positive week in a row. Friday represented the best day for the S&P in nearly three weeks.

The Dow is now about 3.4% from its all-time high on Jan. 26, the S&P 500 is 3.3% shy of that record mark set on the same day and the Nasdaq is 1.2% short of its late-January peak, according to WSJ Market Data Group.

What drove the markets?

Concerns that inflation could be resurfacing and that the U.S. central bank may have to more aggressively raise interest rates to combat such a scenario, has been the primary driver of trading in recent weeks, even eclipsing a strong earnings season.

The fear recently pushed the Dow and S&P into correction territory, though they have recovered much of their lost ground. Last week, investors were heartened by a recent Fed report that gave little hint it was prepared to raise U.S. interest rates more aggressively this year, as has recently been a primary investor fear.

On Monday, St. Louis Fed President James Bullard said he doesn’t think the so-called neutral U.S. interest rate is likely to rise much over the next two years. Separately, Fed Governor Federal Randal Quarles said he sees ‘encouraging signs’ of a turning point in economy’s long-run growth prospects but also emphasized that faster growth will not automatically lead to out-of-control inflation.

The main attraction this week will be Fed Chairman Powell, who will head to Capitol Hill on Tuesday for the first of two sessions of questions with U.S. lawmakers. Among other insights, investors want to know if the Fed is planning four interest-rate hikes for 2018 instead of three.

In the latest economic data, the Chicago Fed national activity index came in at 0.12 in January, compared with 0.14 in the previous month. New-home sales ran at a seasonally adjusted annual rate of 593,000 in January, the Commerce Department said. The MarketWatch consensus forecast was for a 648,000 rate.

What were strategists saying?

“We’re setting a stage for where we can live with a higher sense of inflation, but still have a market supported by fiscal policy. In other words, the consensus is that rates shouldn’t go up at a rapid pace,” said Frank Davis, director of sales and trading at LEK Securities. “There was a sense that the move down was overdue and perhaps a bit overdone, so it makes a little bit of sense that the move back up has been rapid as well.”

Jason Pride, director of investment strategy at Glenmede, said investors are worried about inflation due to the different paths that the Fed could potentially take moving forward.

“[The Fed] can use renewed inflationary pressure as an opportunity to tighten further by normalizing interest rates. Alternatively, it may exercise flexibility around a 2.0% target and effectively allow the economy—and potentially inflation—to run hot for some time,” he said in a note.

AMC Networks Inc.AMCX, +0.69%
agreed to buy RLJ Entertainment US:RLJE
for $4.25 a share, a price that represents a premium of 9.8% to its Friday closing price. Shares of AMC were up 2.8% while RLJ jumped 9%.

Gun makers have been more closely followed as more corporate partners sever ties with the National Rifle Association. On Monday, Bank of America said it would ask its clients who manufacture assault rifles how they can help end mass shootings, according to media reports. American Outdoor Brands Corp. AOBC, +0.39%
fell 2.9%.

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